Russia 091204 Basic Political Developments

Boradband Tv News: CTC Media dispute resolution in sight

By Chris Dziadul

The dispute between the Russian commercial broadcaster CTC Media and its former president Alexander E. Rodnyansky may be nearing a resolution.

According to Kommersant, Alfa Group, which owns a 26% stake in CTC Media, is ready to withdraw its legal action against Rodnyansky if he agrees to give up a third of the outstanding shares in the company he has received under the option programme.

Rodnyansky owns 5.41% of CTC Media, worth $111.5 million (€73.9 million) on NASDAQ.

CTC Media filed a civil complaint against Rodnyansky in November, claiming that he was actively co-operating with a competing company, since named as the National Media Group (NMG), the operator of Ren TV and St Petersburg Fifth Channel.

CTC Media’s interests include the CTC network, Domashny and DTV, along with stations in Kazakhstan, Uzbekistan and Moldova.

By Alex Nicholson

Dec. 4 (Bloomberg) -- OAO Mobile TeleSystems, Russia’s largest cellular company, instituted penalties for subscribers who don’t make regular calls, Vedomosti reported today.

MTS, as the company is also called, has 3,000 “dead souls” among its customers in the Moscow region, the Russian newspaper said . Accounts dormant for five months or more will be charged a monthly fee of 10,000 rubles ($343), Vedomosti said.

Dead Souls, a 19th century novel written by Nikolai Gogol, refers to czarist-era serfs, recorded on land registries, who died between censuses.

To contact the reporter on this story: Alexander Nicholson in Moscow at anicholson6@bloomberg.net

Bloomberg: MTS Wants to Buy Eurotel

Mobile TeleSystems said Thursday that it was seeking regulatory approval to buy Eurotel as talks with the local telecommunications operator advance.

MTS will make a final decision on the purchase after the Federal Anti-Monopoly Service has ruled on the application, spokeswoman Yelena Kokhanovskaya said, declining further comment.

Eurotel, based in Moscow, supplies trunk lines to telecommunications operators, according to its web site. MTS may pay as much as $150 million for Eurotel, Vedomosti reported Thursday.

The Moscow Times: Evraz Says Bonds Approval Expected

By Alex Anishyuk

Evraz Group, the steel and mining giant, expects to win approval within days to issue $1 billion in ruble bonds and may also seek a loan or dip into its cash reserves to refinance its staggering debt, chief financial officer Giacomo Baizini said.

“We’ve filed for registration of several bond prospectuses worth a total of 30 billion rubles, and we expect to receive approval from the Federal Service for Financial Markets,” Baizini told The Moscow Times.

“From that point, we can issue bonds of up to 30 billion rubles any time within a one-year window, but we’re not obliged to issue, and we have not told anybody that we will issue,” he said.

The decision on whether to issue bonds and the size of the potential issue will depend on market conditions and Evraz’s financing requirements, he said.

Evraz raised $900 million in July from an issue of the notes on the London Stock Exchange and a share sale in Evraz Holding Finance.

Evraz currently has $8.5 billion in debt maturing by 2017, including $1.1 billion due by September 2010.

The debt includes $3.6 billion in bonds maturing after 2013, $2.1 billion in a syndicated debt to 30 banks where Deutsche Bank is the agent, and $1.8 billion to VEB, Baizini said. The remaining debt is with various foreign and Russian banks.

The company, which repaid a 10 billion ruble loan to VTB last month and bought back $506.2 million in 2013, 2015 and 2018 eurobonds this week, is optimistic about meeting its remaining obligations, Baizini said.

“Between now and Sept. 30, 2010, we need to pay $1.1 billion in debt, and today we have exactly $1.1 billion in cash on our accounts, which is a mere coincidence,” he said.

“Of course, we can’t spend all of this money on debt repayment because the company needs to keep about $300 million on its balance to operate. But we have up to $800 million in free cash that we could use to pay off some of the debt.”

Evraz’s operations are generating a positive cash flow, and the company will be able to repay the balance with its own operating profit if the market situation remains stable, Baizini said, adding that the company might also attract a loan to cover the remaining $300 million but would prefer to get the cheapest money possible.

“Regarding further maturities, we are aiming to refinance them either through bank loans or the capital markets, hence the registration for the ruble bond,” he said. “Ideally, we would seek refinancing at a lower rate than our current average cost of dollar debt, which is approximately 7.5 percent.”

The recession has struck Evraz badly, affecting all of its operations, Baizini said.

“Before the recession, the largest factor in our good performance was the Russian market,” he said. “We used to sell 60 percent of what our Russian plants produced domestically. Now we export 60 percent and sell only 40 percent on the domestic market, because you know how dramatically the construction market has shrunk in Russia.”

Construction shrank 14.5 percent in the first 10 months of 2009, according to the State Statistics Service, while a summer survey by an association of builders indicated that work remains suspended at 80 percent of construction sites.

“According to our estimates, demand for our products in the construction industry fell by 30 percent,” Baizini said. “Nonetheless, the Russian domestic market remains a priority for us, as can be seen by our recent acquisition of metals trader Carbofer.”

Evraz acquired Carbofer Metall, one of the largest Russian steel distribution networks, from Luxembourg-based Carbofer Group in October for an undisclosed amount.

Evraz has reduced costs significantly at all levels to meet its obligations with creditors, Baizini said.

“The first thing that you really do to save cash is reduce investments in new equipment, so that was what we did,” he said. “We also reduced wages at all levels and bonuses for top management here in Moscow and everywhere else. We shut down some inefficient production capacities because some of the equipment we were running, particularly in Russia, was very energy consuming.”

The company hopes to see the economy bounce back a bit next year, but is not counting on any shift in the first quarter. “We will not see that before March because we basically supply the construction market, and construction slows down over the winter because of the weather,” Baizini said.

Evraz reported a 58 percent drop in revenue in the first nine months of 2009 to $7.2 billion, compared with $17.1 billion during the same period in 2008. Steel sales were down 22 percent to 10.7 million tons over the same period.

But an improvement has been seen on a quarter-to-quarter basis, Baizini said, and the company expects flat fourth-quarter results.

“We had $468 million EBITDA for the first half of 2009, and we reported $406 million in the third quarter alone,” he said. “The fourth-quarter results, I think, may be a little bit lower than in the third quarter, mainly because winter months are traditionally seasonally weak.”

Evraz Group is a vertically integrated mining and steel company with headquarters in Luxembourg. It is majority owned by Lanebrook on behalf of chairman Alexander Abramov, chief executive Alexander Frolov, and investors led by billionaire Roman Abramovich.